Bankruptcy

Before the introduction of Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs), Bankruptcy was often the only option available to those with serious debt problems.

In Bankruptcy, you will typically be discharged from your unsecured debt (apart from debts owed to Student Loans in twelve months and can start afresh, although it is possible that you’ll be asked to pay a proportion of your disposable income each month (known as an Income Payments Agreement, when entered into voluntarily, or an Income Payments Order, when obtained from a court by the Official Receiver or Trustee) for a period of up to three years.

Bankruptcy also has a number of serious legal and professional implications, which will need to be considered carefully before any decision is made – for example, you are unable to work in some types of jobs as an undischarged Bankrupt. That's why it's so important that you seek impartial debt advice from a trusted source.

Making an application for your own Bankruptcy will cost £680. This includes the adjudicator’s fee, currently set at £130, and the Bankruptcy deposit of £550.  

If there is any equity available in your home (by legal ownership or beneficial interest) it is transferred automatically to the Official Receiver who will look to release it by selling the property. You will also find credit difficult to come by in the future.

In extreme cases, where reckless or dishonest behaviour can be established, a Bankruptcy Restriction order (BRO) can be made which extends the imposition of bankruptcy on individuals for a period of between 2 - 15 years.

You can sometimes be forced into bankruptcy if your debts are over £5,000 and you have frequently missed payments, or if you have broken the terms of an Individual Voluntary Arrangement (IVA). Some people choose to declare bankruptcy themselves but you need to explore all other options very carefully first.

If you need advice on Bankruptcy, there's no need to wait or book an appointment, our advisers are available Monday to Friday 8am to 8pm and Saturday 9am to 3pm on 0800 043 40 50.

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The advantages of bankruptcy

  • Your unsecured debts will be written off.
  • You will not deal directly with the people you owe money to
  • You should be able to make a fresh start, typically after 12 months.

The disadvantages of bankruptcy

  • You may lose your home if you have any equity available (by title or beneficial interest).
  • You may be asked to sell your car or trade down for a less expensive model.
  • Until your bankruptcy is discharged you may find it difficult to obtain, or change, a mortgage.
  • Some professional bodies, such as chartered accountants or solicitors, may have rules prohibiting membership and you cannot enlist in the armed forces as an undischarged Bankrupt.
  • The court may enforce an ‘income payments order’ for three years if it deems it necessary.
  • Your credit rating will be affected.